How Do You Determine your Return On Investment (ROI)?

2 Replies

Whether you are investing to Fix & Flip or Buy & Hold the questions are many: What is the closing percentage? What is the Loan Annual Interest Rate? What are the monthly utilities costs? What are the anticipated repair costs, and are they from a reliable contractor? How long will it take to complete the repairs needed to either Fix & Hold or Fix & Flip the property?

What is the impact of these variable on your ROI?

Bluntly, it is the uncertainties that create the most disappointment when deciding whether to Fix & Flip or Buy & Hold a property. People will tell you that dealing with these uncertainties is part of the industry. But, doesn’t it make sense to quantitatively deal with these uncertainties in a way that increases your confidence as an investor? Of course it does?

Investors must perform due diligence.

Your objective is to understand with confidence that the numbers you are using to make an investment decision are relevant, reliable, and effective.

There are many tools available to help you compute your ROI. Finding the right one; the one that will give you a realistic picture of how your expenses impact your ROI is the key.

@Hector Chavez On the buy and hold front, I think it's the long-term maintenance factor that most people leave out.  As homes age, they naturally are going to require more funds to maintain.  

I've tried many tools, including the BP tool here, which is good.  But I am stuck on using  my spreadsheets that I've evolved over time for analysis.